# Phio Pharmaceuticals Corp.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Phio Pharmaceuticals Corp.](/companies/phio.md) (CIK 1533040)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 21:31 ET
- Period: 2023-09-30
- Accession: 0001683168-23-007809
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1533040/000168316823007809/phio_i10q-093023.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1533040/000168316823007809/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $1.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $5.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$8.9m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$2.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$8.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.14 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$5.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.14 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$5.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 2,440,164 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 1,775,043 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$8.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $5.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2023-09-30 | $9.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $9.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $2.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $7.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,899 characters.

*In this report, “we,” “our,” “ours,” “us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune, LLC and the ongoing business operations of Phio Pharmaceuticals Corp. and MirImmune, LLC, whether conducted through Phio Pharmaceuticals Corp. or MirImmune, LLC.*

*This management’s discussion and analysis of financial condition as of September 30, 2023 and results of operations for the three and nine months ended September 30, 2023 and 2022 should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (the “****SEC”****) on March 22, 2023 (the “****2022 Form 10-K”).***

*This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “intends,” “believes,” “anticipates,” “indicates,” “plans,” “expects,” “suggests,” “may,” “would,” “should,” “potential,” “designed to,” “will,” “ongoing,” “estimate,” “forecast,” “target,” “predict,” “could” and similar references, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Risks that could cause actual results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by inflationary pressures, rising interest rates, recession fears, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, and the success of any such collaborations, the timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities, the timing or likelihood of regulatory filings and approvals, the success of our efforts to commercialize our product candidates if approved, our ability to manufacture and supply our product candidates for clinical activities, and for commercial use if approved, the scope of protection we are able to establish and maintain for intellectual property rights covering our technology platform, and our ability to obtain future financing. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including those identified in our 2022 Form 10-K under the heading “Risk Factors” and in other filings the Company periodically makes with the SEC. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this report except as required by law.*

### Overview

Phio is a clinical stage biotechnology company whose proprietary INTASYL™ self-delivering RNAi technology platform is designed to make immune cells more effective in killing tumor cells. We are developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems. Our efforts are focused on developing immuno-oncology therapeutics using our INTASYL platform. We have demonstrated preclinical efficacy in both direct-to-tumor injection and adoptive cell therapy (“**ACT”**) applications with our INTASYL compounds.

### PH-762

PH-762 is an INTASYL compound designed to reduce the expression of cell death protein 1 (“**PD-1”**). PD-1 is a protein that inhibits T cells’ ability to kill cancer cells and is a clinically validated target in immunotherapy. Decreasing the expression of PD-1 can thereby increase the capacity of T cells, which protect the body from cancer cells and infections, to kill cancer cells.

Our preclinical studies have demonstrated that direct-to-tumor application of PH-762 resulted in potent anti-tumoral effects and have shown that direct-to-tumor treatment with PH-762 inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory models. Importantly, direct-to-tumor administration of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic anti-tumor response. We believe these data further support the potential for PH-762 to provide a strong local immune response without the dose immune-related adverse effects seen with systemic antibody therapy.

In November 2023, we announced the first patient dosed in our U.S. multi-center Phase 1b clinical trial with PH-762 under a previously cleared Investigational New Drug (“**IND”**) application by the Food and Drug Administration. Intratumoral injection of PH-762 in this dose-escalating trial will treat patients with cutaneous squamous cell carcinoma, melanoma and Merkel cell carcinoma and is currently open for continued enrollment of patients. This trial is designed to evaluate the safety and tolerability of neoadjuvant use of intratumorally injected PH-762, assess the tumor response, and determine the dose or dose range for continued study of PH-762.

Given our intention to focus our efforts and resources on our U.S. clinical trial with PH-762, we have completed the winding down process for our first-in-human clinical trial for PH-762 in France, which was limited to the treatment of patients with metastatic melanoma. Safety data from the initial cohort of three patients in the French clinical trial were evaluated by a data monitoring committee in the first quarter of 2023. The safety data review disclosed no dose-limiting toxicity, and no drug-related severe or serious adverse events.

Due to INTASYL’s ease of administration, we have shown that our compounds can easily be incorporated into current ACT manufacturing processes. In ACT, T cells are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient to help the immune system fight cancer. By treating T cells with our INTASYL compounds while they are being grown in the laboratory, we believe our INTASYL compounds can improve these immune cells to make them more effective in killing cancer. Preclinical data generated in collaboration with AgonOx, Inc. (“**AgonOx”**), a private company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s “double positive” tumor infiltrating lymphocytes (“**DP TIL”**) with PH-762 increased their tumor killing activity by two-fold.

In March 2021, we entered into a clinical co-development collaboration agreement (the “**Clinical Co-Development Agreement”**) with AgonOx to develop a T cell-based therapy using PH-762 and AgonOx’s DP TIL. Under the Clinical Co-Development Agreement, we committed to provide financial support for development costs of up to $4 million to AgonOx for expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with advanced melanoma and other advanced solid tumors. We are also eligible to receive certain future development milestones and low single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.

PH-762 treated DP TIL are being evaluated in a Phase 1 clinical trial in the United States with up to 18 patients with advanced melanoma and other advanced solid tumors by AgonOx. The primary trial objectives are to evaluate the safety and to study the potential for enhanced therapeutic benefit from the administration of PH-762 treated DP TIL. The Company announced the first patient was dosed in August 2023 and the trial is open for the continued enrollment of patients.

As of September 30, 2023, there is approximately $2,964,000 of remaining costs not yet incurred under the Clinical Co-Development Agreement.

### PH-894

PH-894 is an INTASYL compound that is designed to silence BRD4, a protein that controls gene expression in both T cells and tumor cells, thereby effecting the immune system as well as the tumor. Intracellular and/or commonly considered “undruggable” targets, such as BRD4, represent a challenge for small molecule and antibody therapies. Therefore, what sets this compound apart is its dual mechanism: PH-894 suppression of BRD4 in T cells results in T cell activation, and suppression of BRD4 in tumor cells results in tumors becoming more sensitive to being killed by T cells.

Preclinical studies conducted have demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer cells. Similar to PH-762, preclinical studies have also shown that direct-to-tumor application of PH-894 resulted in potent and statistically significant anti-tumoral effects against distant untreated tumors, indicative of a systemic anti-tumor response. These preclinical data indicate that PH-894 can reprogram T cells and other cells in the tumor microenvironment to provide enhanced immunotherapeutic activity. We have completed the IND-enabling studies and are in the process of continuing to finalize the study reports required for an IND submission with PH-894. As a result of the reprioritization to advance our clinical trial with PH-762 in the U.S., we have elected to defer the IND submission for PH-894.

### Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results.

There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our 2022 Form 10-K.

### Results of Operations

The following table summarizes the results of our operations for the periods indicated, in thousands:

| Description | Three Months Ended September 30, 2023 | 2022 | Dollar Change | Nine Months Ended September 30, 2023 | 2022 | Dollar Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating expenses | $2,776 | $3,571 | $(795) | $8,925 | $8,732 | $193 |
| Operating loss | $(2,776) | $(3,571) | $795 | $(8,925) | $(8,732) | $(193) |
| Net loss | $(2,780) | $(3,576) | $796 | $(8,931) | $(8,749) | $(182) |

### Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

### Operating Expenses

The following table summarizes our total operating expenses, for the periods indicated, in thousands:

| Description | Three Months Ended September 30, 2023 | 2022 | Dollar Change | Nine Months Ended September 30, 2023 | 2022 | Dollar Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $1,808 | $2,508 | $(700) | $5,325 | $5,398 | $(73) |
| General and administrative | 968 | 1,063 | (95) | 3,600 | 3,334 | 266 |
| Total operating expenses | $2,776 | $3,571 | $(795) | $8,925 | $8,732 | $193 |

17

### Research and Development Expenses

Research and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services, costs to acquire technology licenses, research activities under our research collaboration, expenses associated with preclinical and clinical development activities and other operating costs. Our research and development programs are focused on the development of immuno-oncology therapeutics based on our INTASYL therapeutic platform. Since we commenced operations, research and development expenses have been a significant portion of our total operating expenses and are expected to constitute the majority of our spending for the foreseeable future.

Research and development expenses for the three months ended September 30, 2023 decreased 28% as compared to the three months ended September 30, 2022. The decrease in research and development expenses was primarily due to the completion of our IND-enabling preclinical studies for PH-894 of approximately $1,515,000, partially offset by an increase in clinical-related costs of approximately $788,000 for our two U.S. PH-762 Phase 1 clinical trials as compared to the prior year period.

Research and development expenses for the nine months ended September 30, 2023 decreased 1% as compared to the nine months ended September 30, 2022. The change in research and development expenses was primarily due to a decrease in costs related to the completion of our IND-enabling preclinical studies for PH-894 of approximately $1,562,000 and reduced lab supplies of approximately $218,000 as a result of a decrease in lab personnel, partially offset by an increase in clinical-related costs of approximately $1,647,000 for our two U.S. PH-762 Phase 1 clinical trials as compared to the prior year period.

We anticipate research and development expenses to increase as a result of our clinical-related activities as our programs progress in clinical development.

### General and Administrative Expenses

General and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional fees for legal and patent-related activities, audit, tax and consulting services, as well as other general corporate expenses.

General and administrative expenses for the three months ended September 30, 2023 decreased 9% as compared to the three months ended September 30, 2022. The decrease was primarily due to the reduced use of business development consultants of approximately $73,000 as compared to the prior year period.

General and administrative expenses for the nine months ended September 30, 2023 increased 8% as compared to the nine months ended September 30, 2022. The increase in general and administrative expenses was primarily due to higher legal fees of approximately $359,000 and audit fees of $62,000, partially offset by decreases in payroll-related expenses, including executive search-related fees, of approximately $190,000 due to changes in headcount as compared to the prior year period.

### Liquidity and Capital Resources

Historically, our primary source of funding has been through the sale of our securities. In the future, we will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our operations. We have reported recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations for the foreseeable future. At September 30, 2023, we had cash of $8,407,000 as compared with $11,781,000 at December 31, 2022.

During the nine months ended September 30, 2023, we completed the April 2023 Financing and June 2023 Financing (each as defined in Note 6 to our condensed consolidated interim financial statements) and received total net proceeds of $5,048,000 after deducting placement agent fees and offering expenses. For further information regarding the April 2023 Financing and June 2023 Financing, see Note 6 to our condensed consolidated interim financial statements included elsewhere in this Quarterly Report.

We have limited cash resources, have reported recurring losses from operations since inception and have not yet received product revenues. These factors raise substantial doubt regarding our ability to continue as a going concern, and our current cash resources may not provide sufficient capital to fund operations for at least the next 12 months from the date of the release of the financial statements included elsewhere in this Quarterly Report. Our continuation as a going concern depends upon our ability to raise additional capital through equity offerings, debt offerings and/or strategic opportunities to fund our operations. There can be no assurance that we will be successful in accomplishing any of these plans in order to continue as a going concern. The financial statements included elsewhere in this Quarterly Report do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

The following table summarizes our cash flows for the periods indicated, in thousands:

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(8,379) | $(9,424) |
| Net cash used in investing activities | (5) | (121) |
| Net cash provided by (used in) financing activities | 5,010 | (28) |
| Net decrease in cash and restricted cash | $(3,374) | $(9,573) |

### Net Cash Flow from Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 decreased 11% as compared to the nine months ended September 30, 2022, primarily due to decreased cash outflows from changes in operating assets and liabilities of $1,311,000 as a result of liabilities owed for the payments related to the IND-enabling studies with PH-894 and clinical supply manufacturing of PH-762 and PH-894 in the prior year period partially offset by an increase in net loss of $182,000 and non-cash related items of $84,000.

### Net Cash Flow from Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 decreased 96% as compared to the nine months ended September 30, 2022, primarily due to changes in laboratory and computer equipment purchases for our facility over the comparative period.

### Net Cash Flow from Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 increased as compared to the net cash used in financing activities for the nine months ended September 30, 2022, primarily due to the completion of our April 2023 Financing and June 2023 Financing.

### Contractual Obligations

The Company does not intend to renew the lease for its corporate headquarters and primary research facility in Marlborough, Massachusetts, which will expire on March 31, 2024. Beginning in April of 2024, we expect to continue operations as a fully remote business.

Details of our obligations under the Clinical Co-Development Agreement with our partner AgonOx as of September 30, 2023 can be found in Note 2 of the condensed consolidated interim financial statements included elsewhere in this Quarterly Report. Outside of the above, there have been no material changes to the contractual obligations as disclosed in our 2022 Form 10-K.

## Controls and procedures

As filed, 1,797 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer (who is also acting as our Principal Financial Officer), evaluated the effectiveness of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “**Exchange Act”**)) as of the end of the period covered by this report to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report, management, with the participation of our Principal Executive Officer (who is also acting as our Principal Financial Officer), concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ending September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 666 characters.

There have been no material changes in our risk factors set forth in Part I, “Item 1A. Risk Factors” in our 2022 Form 10-K. The risk factors disclosed in Part I, “Item 1A. Risk Factors” in our 2022 Form 10-K could materially adversely affect our business, financial condition, or results of operations. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including these risks. Additional risks not currently known or currently material to us may also harm our business.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001683168-23-007809. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.